If you conduct a business activity as an individual or as a partner in a partnership that resulted is a loss you may be able to offset those losses against your income from other sources, for example wages.

The losses cannot be offset against other assessable income in an income year unless:

  1. an exception applies;
  1. you meet the income requirement and one of the four tests is satisfied, or
  2. the Commissioner has exercised his discretion or ruled that it will be exercised to allow you to claim the loss.

The exceptions apply if your business is a primary production or arts business and your other assessable income is less than $40,000, or the loss is solely due to deductions claimed as allowed by the small business and general business tax break in the 2009-10 and 2010-11 income years.

Taxpayers with an adjusted taxable income below $250,000 can offset a loss from a business activity if it passes one of the following tests:

  1. business’s assessable income in the current year is at least $20,000;
  2. business has generated a profit in three of the past five years (including the current year);
  3. the total value of real property, used on a continuing basis in carrying on the activity is at least $500,000;
  4. the total value of other assets, used on a continuing basis in carrying on the activity is at least $100,000.


You may apply for the Commissioner’s discretion to allow you to claim the loss if you do not meet the income requirement or any of the four business tests. However, a recent case demonstrated that the Commissioner will grant a relief only in special circumstances that are outside the taxpayer’s control.

If you are not able to offset your loss in the current year, you must defer the loss and may be able to offset it in a future year, either by passing one of the tests or making a profit in the business.

If you are unsure whether you can offset a loss from your business against your other income please contact our office on 02 9223 9166 or visit submit an online enquiry.

By Julia Kharlamova